Last Updated on December 15, 2023 by Jason Nguyen
Home valuation only matters when buying or selling property for most people. They do not bother to know the value of their house regularly. They fail to keep track of the appreciation or depreciation of their property.
The value of your home goes up and down depending on the real estate market. There are other factors, but generally, the real estate market significantly impacts your home’s value.
If you own a house, you should know its value for many reasons. It is crucial not only when buying or selling your property but also for other financial planning purposes.
Here are some reasons why knowing your house’s value is essential.
Home Insurance
Your home insurance is based on the value of your property. If you do not have an updated valuation, you could be paying too much or too little for your cover. Getting your home valued at least once every three years is advisable to ensure that you are not overpaying or underinsured.
Sometimes, you may require a professional home appraisal to get home insurance. This is usually the case if you live in an area prone to natural disasters like floods or earthquakes.
Equity Release
If you are over 55, you may be considering equity release as a way to supplement your retirement income. Equity release involves taking out a loan against the value of your property. The loan is repaid when the property is sold, usually after your death.
By understanding the value of your home, you can determine how much money you could potentially release through equity release. This will help you budget for your retirement and make informed financial decisions.
Additionally, if you are considering downsizing in retirement, you will need to know the value of your home to calculate how much equity you have to work with.
Taxes
Some regions charge property tax based on the value of your home. In most cases, the tax is a percentage of the property’s value. Therefore, if you do not know the value of your home, you may be overpaying or underpaying your property tax.
If you sell your property for a profit, you may also be required to pay capital gains tax. The amount of tax you owe will depend on the value of your home, so it is vital to have an accurate valuation.
The home’s value will be used to calculate inheritance tax when you inherit a property. If the property’s value is not accurately assessed, you could pay more tax than you owe.
Mortgage Refinancing
If you are looking to refinance your mortgage, the value of your home will be an essential factor. Lenders use the value of your property to determine how much money they are willing to lend you. If you are looking for a lender in Ontario, the mortgage specialists at https://altrua.ca/best-mortgage-rates-ontario/ guide you on some of the best mortgage rates. They will be able to help you get the best deal possible.
Additionally, the value of your home will affect the interest rate you are offered on your loan. The higher the value of your home, the lower the interest rate you are likely to qualify for.
Retirement Planning
Most people choose to downsize in retirement and use the proceeds from the sale of their homes to supplement their income. If you plan to downsize, you must accurately know your property’s worth. This will help you budget for retirement and make informed financial decisions.
Additionally, if you consider leaving your home to your children in your will, the property’s value will be used to calculate inheritance tax. Therefore, it is crucial to have an up-to-date home valuation to minimize the tax your beneficiaries will owe.
Selling Your Home
This is the most significant transaction you will ever make, so it is vital to have an accurate idea of your home’s value. Hiring a professional appraiser to assess your property is the best way to ensure you get an accurate valuation.
An appraiser will consider several factors, such as the location of your property, the size and age of your home, and any recent renovations you have made. They will also compare your property to similar homes that have sold recently, giving you a good idea of what your home is worth in today’s market.
Home Improvements
Many homeowners view home improvement projects as an investment. By increasing the value of your home, you can potentially increase your equity and net worth.
Therefore, it is essential to have a realistic idea of your home’s worth before undertaking any significant renovations. This will help you budget for the project and ensure that the finished product adds value to your property.
There are several reasons you might need to know the value of your home. Whether you are planning to sell, refinance, or want to stay informed about your biggest asset, it is crucial to have an accurate idea of what your property is worth. Hiring a professional appraiser is the best way to get an up-to-date valuation of your home.